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The dilemma for Kenya's donors

As Kenya's crisis entered its third week, the country's foreign donors were agonising over their future dealings with the regional linchpin. The hurried inauguration of Mwai Kibaki as president, after a farcical vote-counting exercise, leaves aid donors and multilateral lenders in a fix.

Aid to Kenya - which stood at $770m in 2005 - has been steadily rising since Kibaki was first elected in 2002, a reflection of western relief at the retirement of Daniel arap Moi as president and of the industrialised world leaders' pledge at Gleneagles to boost assistance to Africa.

So, should donors continue lending to the new government, which many Kenyans regard as illegitimate? Or should they cut their programmes, as requested by the opposition Orange Democratic Movement, and maybe exacerbate the pov erty that has been one driver of the post-election violence? So far, the international community's stance has been impressively robust.

Britain has not recognised the new government and the Foreign Secretary, David Miliband, has warned Kenyan leaders they risk forfeiting international support if they fail to strike a compromise. Germany wants EU aid suspended if the government rejects international mediation efforts. And the United States, Kenya's biggest donor, sent a shot across Kibaki's bows when it warned that the US would find it impossible to conduct "business as usual" in present circumstances. Many had assumed that Washington's gratitude for Kibaki's co-operation in the "war on terror" would win him an easy ride.

US officials say Washington is looking at a range of options, from cutting projects outside the health sector - which accounts for half of US aid to Kenya - to travel bans on perceived hardliners in government and opposition. European Union ambassadors are studying similar tactics.

Western donors have succeeded in reining in Kenyan leaders in the past. Their most notable achievement was in late 1991 when, exasperated by Moi's harassment of a burgeoning opposition movement, they suspended $350m in aid. With in weeks, Moi rescinded a ban on multiparty politics. But international leverage has dwindled since then, thanks to Kenya's vibrant economy. Aid today accounts for only 5-7 per cent of the national budget, though the current crisis is certain to slash growth.

But anyone expecting a sustained donor campaign to force the government and opposition to the negotiating table should ponder a series of confidential memos from the World Bank office in Nairobi. One memo shows the World Bank country director in Kenya dismissing the head of the EU observer mission, Alexander Lambsdorff, who delivered a damning verdict on the polls, as "not thorough and precise". The country director, Colin Bruce, approvingly cites the "considered view of the UN" that the Kibaki win announced by Kenya's electoral commission was "correct" - an extraordinary claim, given that the UN had no monitoring role in the elections and has denied adopting this position.

Bruce's memo makes no mention of the reve lation by Samuel Kivuitu, the electoral commission chairman, that 48 returning officers went missing when due to phone in their results, nor Kivuitu's admission that he "doesn't know" who won. The country director has not corrected himself, although each day has raised greater questions over Kibaki's "win". Bruce - who attempted unsuccessfully to mediate an agreement between the opposition and State House - enjoys more than intellectual proximity with Kibaki: he rents his home from the presidential couple.

Given a representative with such sympathies, the World Bank, which donors look to for guidance, is unlikely to endorse concerted efforts to rap Kibaki over the knuckles. It is worth remembering that the international community has turned a blind eye to shady electoral tactics at key moments in Kenya's history.

After the 1997 Kenyan elections, donors insisted on deleting a sentence from the election monitors' report that ruled eight constituency results invalid - a finding that cancelled out the ruling party's parliamentary majority.

The probable course of events may be best captured in a hard-nosed analysis by the bankers Citigroup: "Foreign governments are likely to continue to express their concerns," it tells its clients. "However, in practice we believe this is likely to lead to little concrete action."

Past experience in Ethiopia, Uganda and Nigeria suggests that donor outrage is usually followed by full co-operation with governments.